After hitting a new one year-low on the 6
th
of April, the Pound to Turkish Lira exchange rate fluctuated this week as domestic concerns weighed on both currencies.
Bank of England (BoE) Scarcely Impacts GBP Appetite
Thursday saw the Bank of England announce its monthly rate decision and release its meeting minutes.
The discussions held generally met investor expectations mark-for-mark, with the benchmark rate being held at 0.50% and continued ‘Brexit’ discussions taking centre stage.
As analysts and investors were unsurprised by the central bank’s actions, the Pound didn’t experience much movement and was able to hold onto the gains accrued as a result of positive news from earlier in the week.
The UK’s comparatively optimistic Consumer Price Index (CPI) released on Tuesday was a key cause of Sterling strength this week, helping it stay buoyant throughout the latter half of the week.
As a result, the GBP/TRY pair currently looks to gain on the week’s opening levels of 4.0242 as it trends at around 4.0523 after briefly jumping around 180 pips during Friday’s session.
CBRT Announces New Governor, Sterling (GBP) Gains Trimmed
Earlier this week, the Central Bank of the Republic of Turkey (CBRT) announced that its current Governor Erdem Basci would be replaced by his deputy, Murat Cetinkaya, when Basci’s term ends next week.
This move inspired brief and strong confidence in the Turkish Lira as investors felt reassured that monetary policy would remain on track under the wing of an experienced policymaker.
The Lira remained buoyed as Turkish President Tayyip Erdogan and Prime Minister Ahmet Davutoglu,
initially at odds
on who should succeed, reached a compromise and agreed with Cetinkaya’s succession.
Political Tensions Rise and Risk-Sentiment Dips
GBP/TRY soared during Friday’s session despite the week’s optimistic economic news.
OPEC is due to hold a summit on the 17
th
of April, where members and non-member oil producers are set to discuss solutions for the oil price crisis.
As investors remain anxious that an agreement may not be met, risk-sentiment dipped on Friday, allowing Sterling to appreciate against the volatile Lira.
Political tension in Turkey may also have weakened the Lira. Russian news agency Sputnik’s website has been
blocked in Turkey
, a move that shocked the Russian company and sparked additional tension between the nations.
Forecast: GBP/TRY to Move on Risk Appetite
With the OPEC meeting taking place this weekend, GBP/TRY’s movement early next week is likely to reflect the outcome of the meeting.
Analysts are currently split on the likelihood of an agreement, but if one is made oil prices could rally and increase the appeal of riskier currencies such as the emerging-market Lira.
Employment data is due for Britain on Wednesday next week and, if positive, could inspire some new Pound strength.
The same day will also see the CBRT’s new Governor’s first major test, the April 20
th
interest rate decision. Investors expect to assess Cetinkaya mettle after the announcement.